Page 1

DIRECT LINE INSURANCE GROUP PLC HALF YEAR REPORT 2021 STRONG FINANCIAL PERFORMANCE , MOMENTUM IN STRATEGIC TRANSFORMATION Direct Line Group PENNY JAMES , CEO OF DIRECT LINE GROUP , COMMENTED " I'm delighted we've made significant progress on our strategic transformation during the first half of the year at the same time as delivering strong operating profit . We returned to growth in Q2 , which is testament to our diversified business model , with Commercial , Home and Rescue performing strongly . We have declared an interim dividend of 7.6 pence per share , up by 2.7 % over 2020. We are also launching the second £ 50 million tranche of the £ 100 million share buyback programme we announced with our last year end results . " In Motor we saw claims frequency remain below normal levels , fewer new car sales and a reduction in new drivers entering the market . These factors were strongest in Q1 and have started to reverse in Q2 at the same time as motor market premium stabilised . We maintained underwriting discipline throughout the first half , continuing to price for our view of risk , and this , combined with the benefits of achieving a major technology milestone with our new Motor platform now rolled out across Direct Line , Churchill and Privilege , positions us well as we look ahead . We recently announced a new partnership , with Motability Operations , demonstrating the value others place on our exemplary customer service and claims capabilities . This partnership is expected to come into effect in 2023 and to increase our Motor customer base by around 15 % . In - force policies ( thousands ) Of which : direct own brands¹ ( thousands ) " This is an exciting and pivotal point for the business , we've completed the majority of our tech transformation , and we're starting to reap the benefits of what the new systems offer us . This is driving real momentum and means we are entering the second half of the year with ambition and confidence . " Results summary Gross written premium Of which : direct own brands¹ Operating profit² Combined operating ratio² Profit before tax Return on tangible equity annualised² Dividend per share - interim ( pence ) * - special ( pence ) Solvency capital ratio post - dividends and share buyback5 3 August 2021 H1 2021 £ m 14,471 7,465 1,556.5 1,063.7 369.9 84.2 % 261.3 30.1 % 7.6 30 Jun 2021 195 % H1 2020 £ m 14,633 7,370 1,580.8 1,090.3 264.9 90.3 % 236.4 19.9 % 1 7.4 14.4 31 Dec 2020 191 % Change ( 1.1 % ) 1.3 % ( 1.5 % ) ( 2.4 % ) 39.6 % 6.1 pts 10.5 % 10.2pts 2.7 % Financial highlights Direct own brands in - force policies grew by 1.3 % with growth across Commercial direct own brands , Green Flag and Home more than offsetting declines in Motor . Total policies reduced 1.1 % as lockdown restrictions impacted partnership volumes in Travel . Profit before tax of £ 261.3 million was £ 24.9 million higher than H1 2020 following the increased operating profit partially offset by £ 91.5 million of restructuring and one - off costs which primarily relate to the Group's site strategy announced with the full year 2020 results . n / a Change 4pts Gross written premium reduced by 1.5 % as continued growth in Commercial , Home and Green Flag Rescue was offset by declines in Motor and Travel . During H1 , we focused on maintaining the quality of our Motor book resulting in some lost competitiveness and saw reduced risk mix from lower new car sales and fewer new drivers entering the market , with Motor gross written premium falling 6.2 % . The reduction was lower in Q2 , as pricing in the motor market stabilised and risk mix trends started to reverse . Overall , gross written premium increased by 1.6 % in Q2 compared to Q2 2020 , demonstrating the benefits of our diversified business model . Motor's current - year attritional loss ratio was relatively stable at 66.9 % ( H1 2020 : 65.5 % ) , driven by claims frequency remaining below normal levels together with lower premium . In July , claims frequency returned close to the level assumed in our pricing and consequently we expect our Motor current - year attritional loss ratio in H2 to return closer to underlying 2020 levels , which we estimated was around 79 % . Operating profit increased by £ 105.0 million to £ 369.9 million benefiting broadly equally from benign weather conditions , strong prior - year reserve releases , the non - repeat of Covid - 19 impacts on Travel claims and the reversal of investment losses . Progress continued on underlying profitability following a reduction in operating expenses and good current - year trading across the book .